It's All About The FOMC Today...
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In This Issue.

* Currencies drift ahead of FOMC...

* Along with Gold.

* German inflation ticks up, but not enough!.

* The calls for a Chinese collapse have been overly exaggerated!

And Now. Today's A Pfennig For Your Thoughts.

It's All About The FOMC Today...

Good Day! . And a Wonderful Wednesday to you! I'm under the weather today, so this letter is going out from home. It's just "one of those days" and so therefore, I'll miss everyone's smiling faces at the office today, along with the day game at Busch Stadium this afternoon! UGH! Warm weather just can't seem to take hold here, as the chilly weather that we usually experience in early March, is back with us as we get ready to turn the calendar on April and head to May! Double UGH!

Front and Center today, is the Fed's FOMC Meeting this afternoon, in which the Fed members, led by Janet Yellen, will announce that the monthly allowance for bond purchases is being reduced... I'm not in the mood for funny, but I'll give it a shot here... I see the bond guys coming to the Janet Yellen each month and beg for more allowance... Reminds me of: Daddy, can I have a penny? NO! I gave you a penny last week! HA

Ok, that's my best attempt at funny today... Well, under the category of (muffled words) OK, let say Mularky, but I bet you can guess what I said in those muffled sounds. We can talk about the fact that the U.S. continues to try and pull the wool over our eyes, and say with a straight face that inflation is only 1.5% (latest BLS report on 4/15/14). But we'll only get blue in the face, get our blood pressure to nasty levels, and have us Yelling at the walls. Instead, I like to throw darts at those BLS inflation numbers. For instance, did you know that "Beef is now at its highest price in almost 3 decades at $5.30 per pound, that's up more than 25-cents since January of this year! In addition, March 2013 to March 2014, the price of bacon is up 64-cents a pound, chicken breasts are up 24-cents a pound and eggs up 14-cents a dozen.

Now put that in your pipe and smoke it, BLS!

Speaking of Inflation, I told you yesterday that the German states would be sending in their "flash" CPI numbers (consumer inflation) and the hope was that with Germany being the largest economy of the Eurozone, we would see an uptick in inflation from the states, so that the euro wouldn't be subjected to further talk on additional stimulus. Well, that didn't happen. yes, inflation, as a whole (all the states) ticked up, but my a muted amount, thus disappointing the markets, the euro got sold after the data printed, and is now being subjected once again, to talk about the need for additional stimulus.

For those of you keeping score at home, the inflation rate as a whole in Germany printed at 1.1% (up .2%).

Chris sent me a note yesterday that plays well in the sandbox here with that last discussion on the markets calling for additional stimulus in the Eurozone... Bloomberg reported that "Mario Draghi, president of the European Central Bank (ECB) says the ECB is ready to launch a quantitative easing program if necessary. However, he told German lawmakers that the ECB is unlikely to purchase bonds anytime soon." As Chris said in his note to me: "Draghi is the master of jawboning! No plans to purchase bonds anytime soon."

Well, all of us astute Pfennig Readers know all of that, but that doesn't stop the markets from taking the euro to the woodshed...

In other news from Germany this morning, German unemployment fell by twice as much as the forecasts as April's drop marked the 5th consecutive month of unemployment dropping in the Eurozone's largest economy. 25,000 Germans came off the unemployed side of the ledger in April. Only 10,000 was forecast... That should put some of those calls for additional stimulus on their heels, for now...

Elsewhere around the world... Putin is calling for retaliatory measures to the announcement of additional sanctions against Russia, etc. This mess is getting ugly folks... And in a recent poll, well, it would be better if I just gave it to you straight from the horse's mouth... WSJ reported yesterday that: "Americans by large numbers want the U.S. to reduce its role in world affairs even as a showdown with Russia over Ukraine preoccupies Washington."

Moving along, Chris also sent me a note on Canada... Canada announced the other day that they will take advantage of the low rate environment and issue their first ever 50-year bond... Chris said, "the U.S. should do this too"... Sure the longer you can push the debt payment at a low rate out the better, right?

In China, April will go down as the first month of losses in the renminbi / yuan in 7 years! WOW! I guess you could say that the renminbi/ yuan got the 7-year itch! The calls for the collapse of the Chinese economy are once again reaching out to scare everyone away from the currency, but... hasn't China proved something over and over again through the years, of hearing the same calls? They've proved that the calls have been greatly overexaggerated... And I believe we'll see the same thing this time around, but what it does is make holders of renminbi/ yuan nervous... Nothing wrong with that, as long as you realize that China will soon take over the #1 economy in the world position.. No reason to panic over these calls for a collapse of the Chinese economy, folks... We've all been through this several times in the past 9 years... China broke the peg to the dollar in July 2005...

It's difficult to think about how long ago that was given all that has happened in the world and with me, in the years since China broke the peg to the dollar... I would be hard-pressed to come up with everything that has happened since then for sure!

I told you yesterday that i was champing at the bit to read the latest Grant Williams letter called: Things That Make You Go Hmmm... TTMYGH... and in it, he describes the big hole that Japan has fallen into... nothing new there, but, then he dissects the 3 arrow approach that Japanese PM Abe has introduced to the Japanese economy... the first two arrows have been shot, and have not fared too well... It is Williams' theory that the 3rd arrow can't and wont' be shot, because it centers around structural change in Japan... Having lived in Japan for a number of years, Grant Williams can pass judgement on whether the Japanese will accept structural change, like opening the doors to immigration... the chances as i see them after reading his letter, are simply Slim and None, and Slim left town!

Japan is a basket case folks, and debt is what brought them here, and all the attempts by the Central Bank to "make things better"... their malaise is going 20+ years now... And there's no coming back from this dark hole they've fallen into... And what have I told you for a great number of years now? We're turning Japanese, yes, I really think so...

Gold is still holding below $1,300, ahead of the FOMC Meeting this afternoon... I'm sure that traders want to be absolutely certain that there will be no 6-month comment/ faux pas by Janet Yellen before allowing Gold to move back to $1,300...

I saw a comment by James Rickards the other day that really got me thinking... First let's hear the comment, and then I'll give you my thoughts on what I was thinking... here's James Rickards on Gold as they appeared in the 5-Minute Forecast... "What people don't understand about a currency is that its strength relies on the fiscal prudence of the government, and governments are obviously the least prudent entities around."

"I always tell people who say we're not on the gold standard that, in a way, we are," Jim Rickards told us in an interview last summer. "You can put yourself on a personal gold standard just by buying gold. In other words, if you think that the value of paper money will be in some jeopardy or confidence in paper money may be lost, one way to protect yourself is by buying gold, and there's nothing stopping you."

I think that's a wonderful idea... put yourself on the Gold standard! Exchange your dollars for Gold! What a novel idea! I wonder where I heard that before? Hmmm, exchange dollars for Gold... who could it have been?

There was more mixed news from the U.S. Data Cupboard yesterday... U.S. Consumer Confidence slipped a bit, but the S&P/ CaseShiller Home Price Index for February ticked up! Now that surprised me... I bet that Consumer Confidence wouldn't have slipped a bit, had the people getting surveyed known that their house values went up in February!

Today, the U.S. Data Cupboard has some real meat for us in the ADP Employment Report, a reading of GDP, the Employment Cost Index, The Chicago regional manufacturing index, petroleum sales, and of course the FOMC Meeting this afternoon... There's also 3, 10, and 30 year bond announcements today... We've kind of lost track of these refunding announcements because, with the Fed stepping up to buy the majority of bonds auctioned, did it really matter how much in debt we were issuing in the form of bonds? No it didn't... But with the Fed now reducing the allowance for bond buying, this will become important once again, for we'll want to see just who is buying these issuances... My guess? it'll still be the Fed... through the back door, folks...

For What It's Worth... This is a quick and dirty FWIW today, as I really spent more time than I should have trying to find something of interest this morning... I hear my pillow calling me, so here you go... This was in the WSJ yesterday... and talks about the gold fixing banks in London...

"Deutsche Bank resigned from the five-bank panel that sets the London gold price benchmark, three months after it put its seat up for sale. The bank also resigned its place on the three-bank silver fixing panel.

The German lender announced its decision to exit precious-metal benchmarking in January. The bank had sought a buyer for its seats on the gold and silver fixing panels but wasn't able to conclude a sale, according to a person with knowledge of the matter."

Chuck again... don't you find it interesting that Deutsche couldn't find a buyer given the ongoing investigation of the fixing banks? Think about that for a minute, you have some bank that would love to buy this seat on the prestigious London Gold Fixing panel, but when you do the "due diligence" into the seller, you find that the reason they want to sell, is that they want to walk away before something bad is discovered, and you decide that you want to part of that!

To recap... The FOMC Meeting will dominate the markets today, as the market participants want to make absolutely certain that there is no verbiage faux pas again this month before going on about their business. The currencies are still drifting... The euro lost a little ground yesterday and this morning on the news that inflation in the German states didn't move up as strongly as was expected... But Draghi again said he saw no reason to implement bond buying at this time...

Currencies today 4/30/14... American Style: A$ .9268, kiwi .8553, C$ .9123, euro 1.3853, sterling 1.6829, Swiss $ 1.1358, . European Style: rand 10.5309, krone 5.9693, SEK 6.5485, forint 221.81, zloty 3.0319, koruna 19.808, RUB 35.6975, yen 102.52, sing 1.2562, HKD 7.7528, INR 60.31, China 6.1580, pesos 13.0967, BRL 2.2360, Dollar Index 79.64, Oil $100.08, 10-year 2.71%, Silver $19.28, Platinum $1,417.25, Palladium $799.75, and Gold. $1,290.50

That's it for today... Another loss by my beloved Cardinals last night, UGH! I have no idea what has happened to their offense... I bet the manager is wondering also! A Flock of Seagulls is singing their Space Age Love Song this morning on the IPod... I like that one from the band better than their Big Hit, I Ran... Well, I've been up most of the night, man this gets old, fast! Alex begins a Big Week of Water Polo games tonight, which will be the final 6 regular season games before the playoffs start, and then his High School Sports career will be over.. Amazing how quickly that seems to have gone! OK... I've got to get this to Mike, Mike, Mike, what day is it? For him to add the currency roundup... He won't be in for an hour, so it will sit there waiting for him... I hope I can get over this quickly, and be back in the saddle tomorrow! But if not! There's always writing from home available! OK... please go out and make this a Wonderful Wednesday!

Chuck Butler
EverBank World Markets

Posted 04-30-2014 2:47 PM by Chuck Butler
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